Citigroup reported a net loss for the 2007 fourth quarter of $9.83 billion as record profits from its Global Wealth Management operations were overwhelmed by $17.4 billion in subprime-related write-downs.

New York-based Citigroup reported a net loss for the 2007 fourth quarter of $9.83 billion, compared with a profit of $5.13 billion for the same period in 2006, as record profits from its Global Wealth Management operations were overwhelmed by $17.4 billion in subprime-related write-downs. The bank announced plans to sell a further $14.5 billion in preferred stock and also said it would cut its dividend by 41 per cent and sell non-core assets. In addition to $17.4 billion in write-downs, the latest results include a $5.41 billion increase in credit costs – $3.85 billion for loan-loss reserves and $1.56 billion in credit losses. In the third quarter, it wrote down $2.2 billion. For the full year 2007, revenue fell 70 per cent to $7.22 billion from $23.83 billion, and net income was $3.62 billion. "Our financial results this quarter are clearly unacceptable," said new chief executive Vikrim Pandit, the former Morgan Stanley executive who was appointed in mid-December following Charles Prince’s resignation. But, looking beyond the write-downs and increased credit costs, he said revenues and volumes had continued to grow strongly in a number of the bank’s franchises and it had generated record results in international consumer, transaction services, wealth management and advisory. The bank's global wealth management operations, comprising Citi Private Bank and the private client unit of Smith Barney, reported net income rising by 27 per cent to $523 million. Citi Private Bank posted an 85 per cent increase in fourth quarter net income to $196 million compared to the 2006 equivalent, as revenue increased 29 per cent to $682 million, driven by a 36 per cent increase in international revenues, reflecting strong growth in capital markets products in Asia and EMEA. US revenues increased 18 per cent driven by increased average deposit and loan balances and higher investment sales. Client business volumes increased 17 per cent, including higher client assets under fee-based management, up 9 per cent, and average loans, up 33 per cent. Expenses grew 10 per cent, reflecting higher compensation costs, driven by increased client activity and an increase in bankers, and a $26 million pre-tax charge related to headcount reductions. Net income at asset manager Smith Barney increased by only 7 per cent, as increased business volumes and the impact of acquisitions were offset by a 29 per cent increase in expenses and a $41 million charge related to headcount reductions. But revenues grew 27 per cent to $2.78 billion, driven by an 18 per cent growth in fee-based and net interest revenues and a 43 per cent increase in transactional revenues, primarily reflecting the increased ownership of Nikko Cordial in Japan. Assets under fee-based management increased 30 per cent to $446 billion, primarily driven by acquisitions, positive market action and net client asset flows. For the full year 2007, Global Wealth Management posted a 37 per cent increase in net income on the back of a 28 per cent increase in revenue to $12.99 billion. Citi Private Bank delivered a 42 per cent increase in net income to $623 million as revenues rose 22 per cent to $2.46 billion, while Smith Barney contributed a 34 per cent increase in net income to $1.35 billion as revenues rose 29 per cent to $10.53 billion. “We are taking several steps to strengthen our capital base, including today's announcement regarding an investment in Citi by several long-term sophisticated investors, our dividend reset, and our continued focus on divesting non-core assets and businesses,” said Mr Pandit. “We are taking actions to enhance our risk management processes and to improve expense productivity. We are also in the midst of a thorough review of our businesses, which when complete, will drive our execution priorities." Despite receiving a $7.5 billion injection from the Abu Dhabi Investment Authority in November to strengthen its capital base, Citi announced a new round of investments includes $12.5 billion of preferred securities. The Government of Singapore Investment Corporation, which last month pumped $9.6 billion into Switzerland's UBS, is also to buy $6.88 billion worth of Citi. Other investors include former chairman and chief executive Sandy Weill, the Kuwait Investment Authority and Saudi Prince Alwaleed bin Talal bin Abdulaziz Alsaud, who was Citi's biggest investor until the recent injections. Citigroup also announced that it would offer public investors a further $2 billion in newly-issued convertible preferred securities. The bank confirmed it would almost halve its dividend in order to retain capital, despite previous assurances that the payout was safe. Lowering its quarterly dividend by 41 per cent to 32 cents a share, will save the firm $1.1 billion per quarter. This level, it said, was in line with Citi's business mix, capital needs and growth opportunities for each of its business segments.